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Wilmar chairman Kuok buys shares ahead of China unit's IPO

The Edge Singapore
The Edge Singapore • 3 min read
Wilmar chairman Kuok buys shares ahead of China unit's IPO
Insider moves for Issue 953 (week of Oct 5): Wilmar International and Trek 2000 International
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Kuok Khoon Hong, chairman and CEO of palm oil giant Wilmar International, raised his stake in the company ahead of the separate listing of its China-based subsidiary on the Shenzhen Stock Exchange, likely to be later this month.

On Sept 24, Kuok, through three separate entities he controls — HPRY Holdings, Longhlin Asia and Hong Lee Holdings — bought 50,500 shares at $4.30 each. That same day, the group also announced that Yihai Kerry Arawana Holdings (YKA), the China-based subsidiary, has priced its IPO at RMB25.70 ($5.16) per share. Wilmar plans to sell around 10% of YKA.

On Sept 28, Kuok bought another 94,700 Wilmar shares at $4.40 each, again using the same three entities. Kuok now holds a total stake of nearly 797.85 million shares, equivalent to 12.55% of the company.

Through its IPO, YKA expects to raise about RMB13.9 billion, which implies the potential market capitalisation of YKA upon listing is RMB139 billion ($28 billion) against Wilmar’s current market capitalisation of $28 billion.

“Stripping out Wilmar’s 90% stake in YKA (post listing) at IPO price, it suggests that investors are paying only US$1.6 billion for the rest of Wilmar’s assets (ex-YKA), which generated a net profit of US$593 million in 2019, based on our estimates (2019 P/E of 3x),” say CGS-CIMB analysts Ivy Ng and Nagulan Ravi in a report dated Sept 25.

On Sept 28, Wilmar announced the offer saw strong investors’ demand. Of the RMB5.8 billion to be raised from so-called “offline investors”, the tranche was 600.52 times subscribed. Of the RMB3.9 billion to be raised from “online retail investors”, the tranche was 1,749.61 times subscribed.

No longer chairman emeritus

Henn Tan, former chairman of Trek 2000 International, acquired 98,800 shares for a total of $7,614.02, or 7.7 cents each. With the acquisition, Tan’s direct stake increased to 101.6 million shares, or 31.8%, from 31.77% previously. With the addition to a small deemed stake, Tan’s total interest in the company is 102.3 million shares, or 32.03%.

Tan had pleaded guilty in August to two counts of negligently failing to make immediate announcements on interested person transactions back in 2010 and 2013. He was subsequently fined $80,000. Tan on June 29 stepped down as “chairman emeritus” of the company and is longer involved.

“The charges are brought entirely against Mr Henn Tan and the other ex-management staff in their own personal capacity, and does not involve the company and its subsidiaries. The company is currently run by a new management team that has been in place since early 2018. The board would like to reiterate that there has been no disruption to the group’s current business operations,” said non-executive chairman Khor Peng Soon in an announcement on Aug 25.

Earlier, on Aug 5, the company announced it had swung into losses of US$1.1 million for the 1HFY2020 ended June compared to a year ago on fair value losses despite revenue rising by 32.8% to US$10.2 million.

In its earnings commentary, the company says it expects the business outlook to be challenging for the coming 12 months and that it will be “selective” in the kind of projects it takes on.

“To stay relevant and sustainable in this dynamic market, the group continues to invest in R&D and is coming up with innovative solutions to meet the demand of the 5G technology market,” the company adds.

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